Waiting for Dubai’s strata law to deliver

Hugh Naylor

• Last Updated: November 07. 2009 12:07PM UAE / November 7. 2009 8:07AM GMT

DUBAI // Homeowners say its absence creates legal ambiguity and developers complain that without it they are essentially forced to provide extra services for householders.

Both, however, seem to agree that their dilemmas and Dubai’s lacklustre property market could be smoothed over by the emirate’s strata law.

That is, if it is ever introduced.

Intended to legalise independent homeowners’ associations and add much-needed clarity to embryonic housing regulations, the law, commonly referred to as strata title, has been touted for nearly three years as imminent by officials and industry.

It was partly unveiled last year in a skeletal form, with the expectation that the accompanying regulations necessary for enforcing it would be soon in coming.

So far, there has been no sign of any regulations.

“We had three or four release dates when we thought that it was coming out, and none of us are any the wiser,” said Peter Crogan, chief executive of BCS Strata Management Services, a property management firm.

“The whole idea of bringing in this sort of law is that if Dubai is going to survive in the international investment and property market, it’s got to have rules that are internationally acclaimed.”

Dubai Real Estate Regulatory Agency, or Rera, which took a lead role in shaping its regulations, has for the past several months been largely silent on the issue. Officials there did not respond to questions on the issue. And in the interim, developers, homeowners and property management firms warn, the result is wavering confidence and continued confusion in the market.

“Everyone’s frustrated,” said Adrian Quinn, the chairman of Essential Community Management, a strata management firm that has been waiting years and invested a total Dh8 million ($US2.2m) for the day when the law would allow it to bid for rights to manage freehold properties in Dubai.

“The sooner the law comes in, the sooner the transparency comes, and people will feel comfortable buying again into the market.”

Although full details have not been made public, it is believed the law would allow homeowners to do everything from selecting their own property management firms and associated fees, and more clearly delineate rights of ownership between owner and developer while mandating community-wide funds for the upkeep of common areas.

The fact that many developers control their own property management is regarded by many in the industry as a conflict of interest. Authorities have also suggested the same, acknowledging that rates for such services would be lower if firms were allowed to bid for contracts from homeowners’ associations.

Speaking on the strata law in March of last year, Marwan bin Ghalita, Rera’s head, told a conference that it would “further protect real-estate investors and the community at large, as well as deter potential violators from committing irregularities to achieve profits at the expense of the city”.

Mr Quinn goes further: “Currently, the lack of transparency is hurting the Dubai property market severely, because property after property that’s been handed over to the owner is being managed by the developer, not independently.”

Developers are also frustrated, he said. “They don’t have a choice because Rera mandates that, without the strata law, developers are essentially left to do their own strata management, even if they don’t want to.”

Wazir Daredia, executive director and CEO of Trident International Holdings, an upmarket developer in Dubai, said his company would rather not be in the business of managing the properties it developed. “I have no special interest in managing buildings,” he said.

“I’m a developer, and I don’t want to. We don’t make money in this type of venture.”

Even the Middle East’s largest developer, Emaar, is prepared to abandon its current property management system once the strata law is in effect. In an e-mail, Emaar said it would recognise “the right of the owners’ association to choose management firms and service providers”.

Homeowners at the Trident Marinascape have complained of several problems, including thousands of dirhams in fees and ambiguity over ownership of the common law areas, said Marco Scalet, a member of a group of 70 concerned homeowners.

Mr Daredia denied these claims.

Michael Aldendorff, an informal leader of a group of concerned residents in Discovery Gardens which has been critical of its developer, Nakheel, also hopes the Strata law will clarify things. The residents’ main concern is the existence of a community account known as a sinking, or reserve, fund, that is paid by property owners to finance such things as painting and repairing communal areas.

If the money is not there, he said, “then we’ve literally lost millions and millions of dirhams that were supposed to be earmarked for future maintenance, which means, a year in, we’re starting from zero again.”

In an e-mail Nakheel said: “At Discovery Gardens, each building has an association and each of these associations has an individual reserve fund to pay for future capital expenditure such as building painting or lift upgrades, for the respective building.”

The current associations operating in the community are not independent.

It is a similar story at the Jumeirah Beach Residence, says Hamid Hamri, a spokesman for the community’s informal homeowners’ group, which has about 1,200 flats in the community registered with it.

Homeowners there have long been at odds with the developer and its management firm over fees and a range of other issues.

“The main issue for us,” he said, “is we don’t have a feeling that we really own anything in Dubai.”

hnaylor@thenational.ae